Why the 'gig' economy may not be the workforce of the future

Study finds pay for gig workers has dropped over the past two years

By Christopher RugaberAP Economics Writer

WASHINGTON (AP) — The “gig” economy might not be the new frontier for America’s workforce after all.

From Uber to TaskRabbit to YourMechanic, so-called gig work has been widely seen as ideal for people who want the flexibility and independence that traditional jobs don’t offer. Yet the evidence is growing that over time, they don’t deliver the financial returns many expect.

And they don’t appear to be reshaping the workforce. Over the past two years, for example, pay for gig workers has dropped, and they are earning a growing share of their income elsewhere, a new study finds. Most Americans who earn income through online platforms do so for only a few months each year, according to the study by the JPMorgan Chase Institute being released Monday.

One reason is that some people who experimented with gig work have likely landed traditional jobs as the economy has improved. Drivers for Uber, Lyft and other transportation services, for example, now collectively earn only about half as much each month as they did five years ago.

The new data echo other evidence that such online platforms, despite deploying cutting-edge real-time technology, now look less like the future of work. A government report in July concluded that the proportion of independent workers has actually declined slightly in the past decade.

“People aren’t relying on platforms for their primary source of income,” said Fiona Grieg, director of consumer research for the institute and co-author of the study.

The data is derived from a sample of 39 million JPMorgan checking accounts studied over 5½ years. In March 2018, about 1.6 percent of families participated in the gig economy, equivalent to about 2 million households. That is barely up from the 1.5 percent of a year earlier.

Most participants cycle in and out of gig work to supplement their incomes from other jobs. Previous research by JPMorgan has found that in any given month, one in six workers on online platforms are new — and more than half will have left the gig economy after a year of entering it.

For drivers, 58 percent work just three months or less each year through online economy websites. These include ride-hailing services like Uber and Lyft as well as delivery drivers and movers who find work through online apps. Amazon, for example, now uses independent drivers to deliver some packages. Fewer than one-quarter of drivers performed gig work for seven months or more, the study found.

The study also reviewed online platforms that provide home improvement work. These include TaskRabbit as well as dog-walking, home cleaning and other services. Two-thirds of those workers perform gig work for only three months a year or less.

Low pay likely helps explain the frequent turnover of workers who use the gig platforms. For transportation workers, who mostly include Uber and Lyft but also package delivery services, average monthly incomes have fallen from $1,535 in October 2012 to just $762 in March of this year, not adjusted for inflation, the study found.

That drop may at least partly reflect the fact that many drivers are likely working fewer hours, Grieg said. As the number of independent drivers has ballooned over the past five years, drivers have faced intensifying competition. And many have likely found other sources of income as the job market has strengthened. Still, some platforms may be paying their workers less, Grieg said.

How much Uber drivers make on an hourly basis is a hotly debated subject. A 2015 analysis by Princeton University economist Alan Kruger found that drivers in 20 large markets earned $19.04 an hour. But those figures, like JPMorgan’s, do not factor in expenses, such as gas and wear and tear, that drivers themselves must shoulder.

Competition among drivers has clearly intensified. The number of independent workers in taxi and limousine services, which includes ride-hailing companies, jumped 46 percent in 2016, the latest year for which figures are available, according to the Census Bureau.

Todd Suffreti has seen the difference in the two years that he’s driven for Uber. Suffreti, who works out of Frederick, Maryland, says his weekly income has dropped by a quarter since he began.

“It’s really saturated, and the calls don’t come in as often,” said Suffreti, 45. “It’s not like it used to be. I have to work harder and longer to get what I used to get.”

For drivers, online income now makes up just 26 percent of their total annual earnings, the JPMorgan study found — down from nearly 52 percent in October 2013.

Research by Uber’s chief economist, Jonathan Hall, and John Horton of New York University found that when Uber raised its fares, drivers initially earned more money. But there were offsetting effects: The higher rates attracted more drivers while reducing the number of trips consumers made. Overall earnings for drivers soon fell back to their previous levels.

The JPMorgan study found that transportation — including package delivery and moving — is increasingly the dominant force in the gig economy. Transportation makes up 56 percent of all gig work, up from just 6 percent in 2013. Selling items through such online sites as eBay and Etsy has sunk to 19 percent of gig work, down from 72 percent.

“It’s really those transportation platforms that have grown tremendously and now represent the lion’s share of the dollars and participation,” Grieg said.

People who participate in leasing websites, such as Airbnb and car rental site Truro, are earning much more — averaging $2,113 in March of this year. But just 0.2 percent of households participate in such sites, the study found.